E-commerce is defined as the buying and selling products and services through an electronic medium, such as the Internet. In fact, the distinction between Sales (e-sales) and Purchase (e-purchase) helps to define E-commerce.
E-commerce lowers the cost of buyers and sellers, as it eliminates time and spatial limitations as well as transaction intermediaries. Thus, this allows E-commerce to overcome some trade barrier and as a result allows easier access to global trade markets for SMEs at lower costs. It is a huge opportunity for SMEs and MSMEs to take part in international trade. However, until recent years, this was only possible for large firms, as it they possess more resources to use in the required bureaucracy. Hence, through the creation and development of new e-trading platforms, new opportunities have arisen for SMEs. By having access to worldwide markets, these companies have the possibility to sell in larger quantities abroad. Moreover, this not only gives the possibility to increase their return on scale, but also enhance their competitiveness. The benefits from e-platforms are not limited to trading but also include exchange of information and data transfer.
The major challenges that SMEs face within the realm of E-commerce, are regulations in the legal environment, infrastructure (logistics, shipping of goods, delivery service), lack of IT skills (especially in LDCs), security and data protection. Additionally, logistic and infrastructure costs, regulatory uncertainty, and access to skilled labor make the environment even more challenging. Also, the lack of awareness and unavailability of funds, as well as, local restrictions on the international transfer of funds, reduce their access to growth possibilities. Moreover, international payment platforms like PayPal are often not used as these don’t always operate globally.
Furthermore, the shipping price and streamline costs are quite high. The minimum of compulsory inspections varies within one’s country and depending on the product. They can vary from 70 to 300 dollars, which makes cross-border trading more complicated and unclear. Institutions like the world’s custom organization tries to break down the shipping costs and ease this process, but such efforts are not enough. These factors discourage SMEs from engaging in international trade.
New advancements in Information Technology like digital signatures, or the internationalization of banking payment systems, are factors that will continue to ease SME integration.
Currently the WTO has the E-commerce Facilitation Agreement which has allowed Members to make international transactions with very low to no transaction costs. However, this agreement was only implemented for a limited duration, and has been extended 3 times already. Several member countries have asked the WTO to make e-trade facilitation agreement permanent.
A digital chasm currently exists between developed countries, developing countries and LDCs in areas of regulations on cyber security and internet payment systems. Therefore, it is in the interest of the WTO to tackle this problem by encouraging countries to develop such regulations, as well as standardize them across borders (as far as possible). The topic of E-commerce has been put on the list of topics that might be discussed at the Ministerial conference in Buenos Aires 2017 and shows the willingness of members to start discussions about possible regulations in these areas.
In our negotiations, you shall discuss the implications of E-commerce on globalization and for the domestic markets as well as possible regulation standardization and implementation within the existing international trade legal system. This can be done in the form of a new agreement (Information and Technology Agreement) or as amendments to existing agreements. Questions that might come up in the discussions are: Does E- Commerce minimize the gap between developed and developing economies? How can the WTO increase or ensure bigger efforts from the members, to develop the access to the internet and its resources for SMEs specifically?
Download full PDF file: The WTO and Small and Medium Enterprises
Meet the Chairs
Cristina Joy Greuter